Tuscaloosa considering incentives with hotel developer

Officials say that construction costs exceed initial estimates

Workers with the Tuscaloosa Department of Transportation are seen here Feb. 8 as they tear up the pavement on the CityFest lot in downtown Tuscaloosa. Developers for the hotel slated for construction at the lot are asking the city for additional economic incentives.

File | Robert Sutton | Tuscaloosa News

By Jason MortonStaff Writer

Published: Monday, April 8, 2013 at 3:30 a.m.

Last Modified: Sunday, April 7, 2013 at 11:34 p.m.

TUSCALOOSA | Citing an unforeseen rise in costs associated with the development of an upscale hotel downtown, the company behind the project is asking City Hall for additional financial help.

The company Kemmons Wilson of Memphis, Tenn., has requested the city modify an economic incentive package the City Council approved in September to assist the $27 million development planned for the corner of University Boulevard and Greensboro Avenue.

The economic incentives consisted of a series of rebates that will amount to a maximum of $4 million — or 10 years' worth of the rebates, whichever comes first — in property and lodging taxes to Wilson Hotel Management Group, a division of Kemmons Wilson Inc. that oversees hotel development and operations.

The council's Projects Committee agreed last week to authorize the mayor and city staff to negotiate with the developer regarding increased site preparation and material costs.

The negotiations will include possible adjustments to the original incentives package, such as augmenting the incentive payments or adjusting the timing of payments for the purchase price of the property.

A vote could come as early as Tuesday.

“The city's interests in the development are more far-reaching than those of a mere property owner or even hotel owner,” said City Attorney Tim Nunnally, who presented the request to the committee. “The hotel owner's primary goal is to construct and operate a profitable business, whereas the city's goal is that it not only be profitable — so it stays in business — but that it has a synergistic effect on the continued revitalization of downtown.”

Nunnally said the federally required environmental and archaeological assessments ran higher than expected and that material costs have increased in the eight months since the city and Kemmons Wilson came to an agreement on the project.

“As with any development agreement such as the one the city has with the Kemmons Wilson group, there are certain risks that must be shared by the parties,” Nunnally said. “Otherwise, the project cannot be built.”

In August 2012, Kemmons Wilson and the city reached an agreement in which Wilson Hotel Management Group would purchase the city-owned, 2.02-acre tract for $1.855 million. Half of that amount will be paid at closing, with the other half spread over subsequent years.

In exchange, the development company would erect an upscale Embassy Suites hotel featuring convention space, a rooftop bar and a restaurant operated by Chris Hastings of the Birmingham-based Hot and Hot Fish Club.

McLean T. Wilson, vice president of Kemmons Wilson, said the request to City Hall does not mean the project is in jeopardy.

Rather, it's an extension of the relationship that Kemmons Wilson has had with City Hall since this process began.

“With any partnership, as you get more details and a deeper understanding of the work required, a good partnership requires good communication and good transparency,” Wilson said. “We have a great partnership and relationship with the city and, because of that, I do not feel that the project is at any risk.”

Wilson said he anticipates construction to begin in earnest by the end of this month now that the archaeological and environmental inspections are nearing an end.

“We're extremely excited about being to the point of seeing the finish line, of being able to put stakes in the ground and building a wonderful hotel for downtown Tuscaloosa,” Wilson said.

<p>TUSCALOOSA | Citing an unforeseen rise in costs associated with the development of an upscale hotel downtown, the company behind the project is asking City Hall for additional financial help.</p><p>The company Kemmons Wilson of Memphis, Tenn., has requested the city modify an economic incentive package the City Council approved in September to assist the $27 million development planned for the corner of University Boulevard and Greensboro Avenue.</p><p>The economic incentives consisted of a series of rebates that will amount to a maximum of $4 million — or 10 years' worth of the rebates, whichever comes first — in property and lodging taxes to Wilson Hotel Management Group, a division of Kemmons Wilson Inc. that oversees hotel development and operations.</p><p>The council's Projects Committee agreed last week to authorize the mayor and city staff to negotiate with the developer regarding increased site preparation and material costs.</p><p>The negotiations will include possible adjustments to the original incentives package, such as augmenting the incentive payments or adjusting the timing of payments for the purchase price of the property.</p><p>A vote could come as early as Tuesday.</p><p>“The city's interests in the development are more far-reaching than those of a mere property owner or even hotel owner,” said City Attorney Tim Nunnally, who presented the request to the committee. “The hotel owner's primary goal is to construct and operate a profitable business, whereas the city's goal is that it not only be profitable — so it stays in business — but that it has a synergistic effect on the continued revitalization of downtown.”</p><p>Nunnally said the federally required environmental and archaeological assessments ran higher than expected and that material costs have increased in the eight months since the city and Kemmons Wilson came to an agreement on the project.</p><p>“As with any development agreement such as the one the city has with the Kemmons Wilson group, there are certain risks that must be shared by the parties,” Nunnally said. “Otherwise, the project cannot be built.”</p><p>In August 2012, Kemmons Wilson and the city reached an agreement in which Wilson Hotel Management Group would purchase the city-owned, 2.02-acre tract for $1.855 million. Half of that amount will be paid at closing, with the other half spread over subsequent years.</p><p>In exchange, the development company would erect an upscale Embassy Suites hotel featuring convention space, a rooftop bar and a restaurant operated by Chris Hastings of the Birmingham-based Hot and Hot Fish Club.</p><p>McLean T. Wilson, vice president of Kemmons Wilson, said the request to City Hall does not mean the project is in jeopardy.</p><p>Rather, it's an extension of the relationship that Kemmons Wilson has had with City Hall since this process began.</p><p>“With any partnership, as you get more details and a deeper understanding of the work required, a good partnership requires good communication and good transparency,” Wilson said. “We have a great partnership and relationship with the city and, because of that, I do not feel that the project is at any risk.”</p><p>Wilson said he anticipates construction to begin in earnest by the end of this month now that the archaeological and environmental inspections are nearing an end.</p><p>“We're extremely excited about being to the point of seeing the finish line, of being able to put stakes in the ground and building a wonderful hotel for downtown Tuscaloosa,” Wilson said.</p><p>Reach Jason Morton at jason.morton@tuscaloosanews.com or 205-722-0200.</p>